How Much Should You Bid for a Keyword?

Some people mistakenly believe that Finch has created a gigantic bank of keywords and that we figure out how much to bid on a keyword based on search volume and competition. This is basically what happens when Google tells you when they estimate the cost/clicks for a specific term. That’s not how Finch works.

Finch looks at your cost goal - either CPV to measure value per sale or CPA for number of conversions - and then calculates each word’s Cost per Click. Each keyword has the right (and duty) to have your dollars spent on it based on what it brings in. Look at the following CPV example from one of our free audits:

The average position for the keyword is 4.91.

The number of impressions is 3,065 with 97 clicks (3% Click through Rate).

This keyword has had 5 conversions (5% conversion rate).

The cost so far is $49.32, but you’ve earned $414.70.

So you’re spending 12 cents per dollar that you’re making (11.89% CPV). Not bad! But you said that you are willing to spend up to 27 cents per dollar (27.28 % CPV).

Since each keyword earns its spot, and this keyword is below its budget, we’d raise the Cost per Click to help it get more clicks and more conversions. It’s not about getting the top spot; it’s about bidding for the most profitable spot per keyword.

Finch is recommending setting the new Max Cost per Click at $1.17. This doesn’t mean that you’ll pay $1.17; it means you are willing to pay up to $1.17 for the first spot but will settle for less if someone else is bidding above that. What you actually pay per click depends on your Quality Score and how much the ad below you is willing to pay and their Quality Score.

Using CPV, the Max CPC for top performing keywords may seem very high, but that is because you are operating with more and better information that your competitors. You know which keywords make you money and are willing to bid more for these keywords.

Hopefully with this keyword moving up in the ad rankings, it will enjoy a higher click through rate and continued high conversion rate. What happens if it doesn’t? Finch constantly recomputes the bid amounts per keyword based on the clicks and conversions. When those factors change, then the amount you bid will change too.

Additionally, Finch optimizes your placements on the display network using the same methodology. Like keywords, placements must earn their right to be displayed.

Would you like to see lots of examples using your own keywords? Our audit shows you which keywords we would raise, which ones we would lower, and which ones we would toss. Sign up today at finch.com.